Estate and Trust Administration
What is a deceased person’s estate?
Simply put, the estate of a deceased person is everything that the person owned at the time of his or her death. However, some property is excluded from the estate. Two important exclusions are the family exemption and non-probate assets.
The Family Exemption
The family exemption is a set of specific property that is set off from the estate. It immediately becomes the property of the deceased’s surviving spouse, if there is one, or all children under the age of twenty-one, if there are any and there is no surviving spouse. This property includes all of the following:
- Up to $20,000 combined value of housekeeping utensils, electronic and photographic devices, jewelry not disposed of in the will, musical instruments, clothing, a sewing machine, household furniture and appliances, and fuel for personal use.
- Up to $2,500 in combined value of religious books, family pictures, books, computer software, DVDs, CDs, audio tapes, record albums, and other electronic storage devices.
- Up to $20,000 in combined value of domestic and farm animals and 60 days of necessary food, farm machinery, one tractor, and one lawn tractor.
- One motor vehicle not exceeding $25,000 in value.
- Money and marketable securities up to $25,000, offset by the combined excess value of items in all of the above categories.
Non-probate assets are assets owned by a person that transfer outside of probate or administration. Non-probate assets are not part of the estate and generally cannot be gifted by will.
Many non-probate assets are governed by a contract, which controls the transfer. In most cases the owner submits a written beneficiary designation. Such non-probate assets include:
- Life insurance
- Retirement accounts including 401(k), 403(b), IRA, and Roth IRA
- Totten Trust or Transfer-on-Death bank accounts
Many jointly-titled assets are also non-probate assets, and so do not require probate to retitle. Any property that is titled to two or more people as joint tenants with right of survivorship automatically passes to the surviving owners on the passing of any owner. Assets commonly titled as joint tenancies with the right of survivorship include:
- Houses and other real property
- Joint bank or investment accounts
A tenancy by the entirety is a special joint tenancy with right of survivorship that only applies to married couples, but works the same way for probate purposes. It most commonly applies to real estate purchased by a married couple.
Everything not included in the family exemption and non-probate assets is part of the estate. If the deceased had a will, generally it will dispose of all of the contents of the estate. If the deceased did not have a will or if the will does not dispose of everything in the estate, the estate’s contents will be distributed under the [intestacy statute]. To see how the deceased’s property will be distributed, see [What happens if I die without a will?]
Estate Administration and Probate
Regardless of whether your loved one passes without a will, his or her estate will need to be administered. Administration of an estate with a will is called probate. If there is no will, it is called administration. In either case, estate administration often involves selling real estate, preparing of tax returns, paying debts, and preparing and furnishing accountings to beneficiaries, all of which must be handled appropriately before bequests are given to the beneficiaries. The attorneys at Melvin & Melvin, PLLC guide clients through the estate administration process from beginning to end to ensure efficient, complete and economical settlement of a decedent’s affairs. We offer insightful advice, prepare the necessary documentation, and answer questions to assist executors and administrators through the process.
The Personal Representative
Before an executor (an estate administrator appointed by will) or an administrator (an estate administrator appointed where there is no will) can act for the estate, he or she must be appointed by the Surrogate’s Court.
An executor or administrator is often referred to as the personal representative for simplicity. If there is a will, it will usually name an executor and a backup executor in case the first one is unable to act. If no one named in the will is able to act or if there is no will, New York law provides a list of those with priority to be appointed:
- The surviving spouse
- Any other person entitled to distribution under the will or the [intestacy statute]
If a person applying for appointment is entitled to appointment, but is a remote relation to the deceased, the court may appoint a public administrator. The court may also appoint a public administrator for other reasons, such as when a relative cannot be found, or when more than one person with the same priority (like two or more of the deceased’s children) cannot agree on who should be appointed.
Opening an Estate
The nominated executor or a potential administrator (the petitioner) must fill out a petition and submit it to the court with a filing fee that is determined by the value of the estate assets. The petition must include a list of everyone receiving gifts under the will and everyone who would be entitled to a distribution under the [instestacy statute]. All of those named must sign a waiver and consent form waiving their right to a citation and approving the petitioner as personal representative or be cited by the court to appear on a specified hearing date. The court will assign the hearing date when the petition is filed. Anyone who wishes to object to the filing of the will (if there is one) or the appointment of the personal representative must appear in court. If there are no objections at the hearing, the petitioner will generally be appointed as personal representative.
Soon after appointment, the personal representative will receive letters of appointment. Once the letters are received, he or she can officially act. The personal representative will need to apply for a federal tax ID number and open a bank account for the estate. Any bank account owned by the deceased will need to be closed and the funds deposited in the new estate account. If there is any real property or titled property like vehicles, the letters are proof of the personal representative’s authority to retitle or sell the property. Once appointed, it is the personal representative’s job to gather everything owned by the deceased, pay the deceased’s bills, sell or distribute real or personal property as required, prepare an accounting for the court, pay taxes, and finally, once the court approves the accounting, settle the estate by distributing any remaining property (the residual or residuary) as directed in the will or distributing property as directed by the [intestacy statute].
Estate administration can be a complex and tedious process. Our attorneys guide you through the process, prepare accountings, assist with real property sales and titling, represent the estate in court, and perform a multitude of necessary administrative tasks.
Whether appointed as trustee of a living trust or a trust created by a will (called a testamentary trust), trustees must perform their duties to the highest standards of loyalty and honesty to the trust’s beneficiaries. Trustees must also keep immaculate records and prepare and furnish accountings to the trust’s beneficiaries. If a beneficiary objects to the trustee’s actions and a court determines that the trustee did not fulfill his or her duties to the standard required, the trustee can be surcharged, or forced to pay the beneficiary out of his or her own pocket for the loss. Our attorneys guide trustees through administration of their trusts, preparing accountings, representing them in court, and advising them of their duties under the trust.
A trustee has two sets of duties. One set includes whatever duties are imposed by the trust agreement. The second is a set of default duties under trust law called fiduciary duties. Fiduciary duties include:
- Prudence: A trustee must act, when administering the trust, as a prudent person would, in light of the purposes, terms, and circumstances of the trust.
- Loyalty: A trustee must act solely in the interests of the beneficiaries, or the trust’s charitable purpose. A trustee is strictly prohibited from engaging self-dealing or involving himself in a conflict of interest. A trustee must deal fairly with beneficiaries, including communicating all material facts to them.
- Impartiality: A trustee must administer the trust in an impartial manner and not show favoritism to any individual or group of beneficiaries over another, whether in disbursements, investments, or otherwise.
- Keeping records and providing reports: A trustee must keep records and must provide reports to the beneficiaries as provided by the trust instrument or ordered by a court.
- Segregate and identify trust property: Trust property must be kept separate from the trustee’s own property.
- Duty to furnish information to beneficiaries: A trustee is required to provide certain information to beneficiaries, whether or not they ask for it, including the existence of the trust, their status as beneficiaries, and changes or significant developments.
A trustee generally has two sets of powers: those granted by the trust agreement, and those granted by New York’s [Estates, Powers, and Trusts Law Article 11].
When trustees act outside of those powers or violate their duties, there can be serious consequences. Our attorneys guide trustees through administration, assisting them in preparing accountings, advising on proper execution of their duties, and representing the trust in court when required.